President Donald Trump’s trade war with China is escalating as he increased tariffs on goods from the Asian country to 125% on Wednesday, after Beijing’s announcement that it would impose a tariff of 84% on US imports.

Caught in the middle of this trade war are American companies which rely heavily on manufacturing and assembly in China. Apple, which has long relied heavily on assembling the majority of its iPhones in China, could be dealt a major blow.

The White House has maintained that Apple could move manufacturing to the US. Trump posted on his Truth Social network saying: “This is a great time to move your company into the US, like Apple, and so many others, in record numbers, are doing.”

But several analysts are skeptical of whether Apple can do that rapidly and without causing major disruption to the pricing of its devices.

 

The Bank of America has now said that Apple could move iPhone production to the US, but it would nearly double the cost of making the device.

“iPhone cost can increase 25% purely on higher labour cost in the US,” BofA analysts led by Wamsi Mohan wrote in a note on Wednesday, reported Bloomberg.

However, a “significant portion” of parts used in the iPhone would still need to be assembled in China and imported to the US. This could result in a total cost rise of 90% or more, they estimated.

“Unless it becomes clear as to how permanent the new tariffs are, we do not expect Apple to take the step of moving manufacturing into the US,” said Mohan.

Other analysts have been even more skeptical. “The reality is it would take three years and $30 billion (A$47.45 billion) in our estimation to move even 10% of its supply chain from Asia to the US with major disruption in the process,” said Wedbush Securities analyst Daniel Ives last week before the latest escalation of the trade war between China and the US.

Ives has now forecasted that US-made iPhones could cost more than three times their current price because it would be necessary to replicate the complex production ecosystem that exists in Asia.

Apple iPhone 16.

“You build that (supply chain) in the US with a fab in West Virginia and New Jersey. They’ll be $3,500 (A$5695) iPhones,” he told CNN.

About 90% of Apple’s iPhones are believed to be assembled in China. “That’s why I think you see what’s happened to the stock, because no company is more caught up in this tariff front and center in this category five storm than Cupertino and Apple,” he said. “It’s an economic Armageddon, but especially for the tech industry.”

As Trump announced a 90-day pause for countries hit by higher US tariffs, except China, Apple which has diversified some of its production to countries including Vietnam and India, saw its share price climb nearly 15% on Wednesday, but is still more than 18% lower than the start of the year.